All posts tagged Government Shutdown

U.S. consumers are carrying a dark mood into the holiday season—a bad development for retailers.

The Conference Board’s index of consumer confidence unexpectedly worsened in November, falling to 70.4, its weakest reading since April. Economists had expected the index to bounce back this month after the government shutdown caused the index to drop a large 8 points in October. Instead, consumers are even more worried—especially about the future.

The downtrend mimics the decline seen in late 2012 and early 2013, another time when fiscal matters clouded the economic outlook. While Washington policymakers have pushed fiscal matters mostly into the background, consumers still seem upset about what’s going on in Washington.

“I think it is fair to say that the deterioration in confidence since the summer is an accurate reflection of a souring of moods lately, driven by the government shutdown, the rollout of Obamacare, and the general continuing economic malaise,” writes Stephen Stanley, chief economist at Pierpont Securities. He expects a “listless” holiday retail season. Read More »

U.S. employers added 204,000 jobs in October, up from 163,000 in September, the Labor Department said Friday, and the unemployment rate ticked up to 7.3%. Economists are still digesting today’s report, but here are five initial takeaways:

Forget the slowdown: Economists—including Federal Reserve policymakers—had been concerned about the apparent slowdown in job growth over the summer, but many weren’t convinced the trend was real. Friday’s report suggests the skeptics were right. October’s net gain of 204,000 jobs makes it one of the best months of the year. Perhaps even more importantly, the Labor Department revised up August and September’s job gains by a combined 60,000 jobs. The economy has now added an average of just over 200,000 jobs per month over the past three months; before today’s report, the three-month average stood at just 143,000 jobs. Even with the revisions, job growth remains far too slow given the depth of the recent recession—more than four years into the recovery, the U.S. still has nearly 1.5 million fewer jobs than before the crisis—but today’s report should ease fears that the economy is losing momentum.

Don’t stress the unemployment rate: The unemployment rate ticked up to 7.3%, but that’s likely due to October’s partial government shutdown, which left thousands of workers at home on furlough. For complicated reasons, furloughs didn’t affect the headline payroll figures but did affect the unemployment rate. The Labor Department reported that 1.5 million unemployed workers were on “temporary layoff” in October, nearly half a million more than the month before. (Some furloughed workers also apparently reported themselves, incorrectly, as employed.) A back-of-the-envelope calculation suggests the unemployment rate would have fallen to 7.0% without the unusual jump in temporary layoffs.

Few other signs of the shutdown: Federal employment fell by 12,000, but blame that on ongoing cuts in government spending, not on the shutdown—furloughed workers showed up as employed in the payroll figures. There weren’t many other clear signs of the shutdown’s impact. Employment in professional and business services—a broad sector that includes many government contractors—rose by 44,000. There was a very modest downtick in aerospace manufacturing jobs, but nothing large enough to suggest a clear impact from the shutdown. The average workweek remained steady pretty much across the board. Of course, all those figures might have been stronger without the shutdown—hours, in particular, were soft given the relatively strong job gains—but there was no smoking gun. Read More »

Many economists expected the government shutdown had a large negative impact on the October jobless rate, with some expecting the rate to go as high as 7.6%. Instead the October unemployment rate edged up to 7.3% from 7.2% in September.

The government workers on furlough show up in a jobless category called “unemployed on temporary layoff.” It’s a category usually used when factories close for a short-time to changeover to new product lines. In October, those on temporary layoff jumped to 1.5 million from an average of about 1.1 million in the previous 12 months.

With these government employees now back on the job, expect their return to work to reduce the November jobless rate. Read More »

The October jobs report showed U.S. employment expanded by 204,000 last month and the unemployment rate moved up to 7.3%. The October payrolls data, along with upward revisions in prior months, indicates the labor market may be strengthening. Here are highlights:

Revisions: Employment gains for September and August were revised up by a total of 60,000. September now shows a gain of 163,000 jobs, up from 148,000,while August is at 238,000, up from 193,000.

Jobless Rate: The unemployment rate increased by 0.1 percentage point, reflecting government workers furloughed during the first half of the month. The unemployment rate had declined in the previous three months. The uptick was less than economists had expected. Economists surveyed by Dow Jones Newswires expected an unemployment rate of 7.4% in October.

Government jobs: Federal employment decreased by 12,000 in October. Total public-sector employment fell by 8,000 last month. The federal government was partially closed in the first half of the month.

Winner: Private sector employment expanded by 212,000, the best gain since February, driven by a service-sector gain of 169,000 jobs. Employment in leisure and hospitality businesses rose by 53,000 last month.

Loser: The wholesale trade sector shed 5,400 jobs last month.

Work Week: The average work week for private employees stood at 34.4 hours last month. That compares to 34.3 hours a year earlier.

Participation: The civilian labor force participation rate was 62.8% in October. A year earlier, the rate was 63.8%. Read More »

More than 70,000 federal workers who were furloughed as a result of the partial government shutdown filed for unemployment insurance for the week ended Oct. 5, the Labor Department said Thursday.

It was the first reading for federal employees’ claims, which are reported with a one-week lag and are not seasonally adjusted. The federal government shuttered Oct. 1 after funding ran out, but Congress struck a deal late Wednesday and the government reopened Thursday.

The report marked a 50-fold increase in claims for a program that is normally quiet. For the week ended Sept. 28, 1,391 federal workers filed for claims, according to Thursday’s report.

The claims figures are higher this time around from the last time the government shuttered, in late 1995 and early 1996. That first week, which ended Nov. 18, 1995, nearly 39,000 federal workers applied for benefits, according to Labor Department data, followed by 24,600 the following week. The number declined briefly before spiking again for a second-round shutdown six weeks later. For the week ended Jan. 6, 1996, 26,300 workers submitted applications. Read More »

The worst-case scenario in the latest budget brawl — a catastrophic debt default — was averted. But nobody should be celebrating. The economic toll of the past three weeks will likely take months or years to assess completely. Here’s what we know right now.

Overall U.S. Economy

The shutdown and debt-ceiling fight certainly slowed the economy to some extent, but how much remains a guess at this point. Many forecasters ahead of the 16-day shutdown said they expected a hit of 0.1 to 0.2 percentage point to the annualized rate of economic growth per week of the shutdown, some of which could be reversed afterward.

Now the tallies are coming in. Economists at IHS Global Insight on Wednesday lowered their fourth-quarter growth estimate to an annualized 1.6% from 2.2% “to reflect the cumulative damage” from the fights. Standard & Poor’s economists cut their fourth-quarter forecast, which they had put at 3% in September, down to 2%. Macroeconomic Advisers estimates that overall fiscal-policy uncertainty since late 2009 has shaved economic growth by a third of a percentage point a year, a hit equivalent to 900,000 lost jobs.

Some of the direct effects of the partial shutdown — furloughed government workers and halted government contracts — will be offset in coming months as those areas bounce back. But just a few days into the shutdown, private-sector employers and workers were already seeing damage of their own that may not be offset. The indirect effects will be much tougher to measure. Gauges of uncertainty had already spiked ahead of the shutdown, with real economic effects already evident among businesses and their employees. The promise of another fight in a few months, over the same issues, could keep uncertainty elevated.

John W. Bailey, president of a York, Pa., transportation company that brings tour groups to the Smithsonian museums in Washington, said Wednesday of the 16-day disruption: “I’ve given blood. Let’s put it that way.”

On Wednesday afternoon, members of Congress said they were near a deal to end the shutdown, which began at the start of the month.

Mr. Bailey has been rejiggering his bus drivers’ schedules as some Bailey Coach customers have canceled entirely and others have rescheduled trips to the nation’s capital or Pennsylvania’s Gettysburg National Military Park. He also has rerouted a number of groups to destinations in or near Washington that aren’t affected by the shutdown.

“This week we processed $9,480 in refunds,” to clients who canceled trips this week, Mr. Bailey said. “And then we rebooked an additional $9,092 in trips” that were rescheduled. The firm’s business also has shifted somewhat recently, with more groups heading to New York or Boston.

“These guys [in Washington] have no idea of the turmoil they’ve caused or the money they’ve cost” to businesses and individuals, Mr. Bailey said. Read More »

With the government economic agencies shuttered, a private company has stepped up to try its hand at data releases.

The Carlyle Group looked at data contained in its global portfolio of more than 200 companies to estimate proxies for official U.S. economic data.

In a press release on its website, the asset management company says, “The firm gathers company data– orders, shipments, occupancy rates, etc.– most synchronized with macroeconomic series like GDP, retail sales and industrial production. Carlyle then formally calibrates these data to official series to estimate, for example, what a 1% increase in telecom equipment orders means for overall business spending.”

Consumers are a bit less upbeat about the economy in early October, as the sentiment index falls to 75.2 from a final September reading of 77.5.

The index is at its lowest since January 2013 and the report laid blame at the feet of Washington politicians.

However, the report noted the decline was small despite widespread awareness of the shutdown.

The problem, argue economists at Jefferies, is that it is hard to attribute the decline to any other economic factor. Falling gasoline prices probably offset the shutdown worries; in fact, inflation expectations fell in early October. But the Jefferies economists write “without any economic data over the past two weeks, it is hard to point to any other forces behind the behavior of the confidence index this month. “ Read More »

How the government shutdown will play out is still very uncertain. But the U.S. economy has faced shutdowns before. If the standoff persists, year-end gross domestic product growth is at risk because the shutdown started on the very first day of the fourth quarter.

Looking at the 1995-96 experience, a shutdown lasting a few weeks will be a drag on growth. Nondefense federal spending in the fourth quarter of 1995 sliced about 0.4 percentage point from that quarter’s GDP growth. Some of that missed output was made up in subsequent quarters, but real nondefense government spending didn’t return to its pre-shutdown level until the first quarter of 1997.

The critical difference between then and now is that the late-1990s economy was strong, powered by new technologies. Growth from the private sectors easily offset the shutdown drag. The current recovery is quite mild and a substantial drop in the federal government spending will be harder to absorb. Read More »

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